The Effect of Deposit Money Banks’ Export Financing on Foreign Trade in Nigeria

Abstract

Nigeria's non-oil exports' poor performance and ongoing trade deficit have sparked questions about the sufficiency of the financial assistance available to exporters, especially by the banking industry. The desire to comprehend how commercial banks use export financing methods to boost international trade is what motivated this study. This study examined the effect of commercial bank export financing on Nigeria’s foreign trade. The study adopted ex-post facto research design and data were sourced using secondary means. Time series data was generated from the CBN Statistical Bulletin and NBS reports with 44 years’ time scope spanning from 1981-2024. This study employed descriptive statistics, Stationarity Test (ADF Unit Root Test), Lag Length Selection, ARDL Long-Run and Bounds Test Result, Heteroskedasticity Test (Breusch-Pagan Test) based on the E-views 10 statistical software. The empirical result showed that commercial bank export financing has a significant effect on Nigeria’s imports, exports and balance of trade in the long run as shown by the p-values of 0.0000, 0.0001 and 0.0088 respectively while commercial bank export financing has no significant effect on Nigeria’s trade openness in the long run as indicated by p-value 0.5604 at 5% level of significance. The study recommended among others that government should strengthen export financing schemes like the Nigerian Export-Import Bank (NEXIM), with strict guidelines to ensure that funds are directed only toward activities that promote local production for export, not for financing import-dependent businesses. Finally, Nigerian government should prioritize sectors with high export potential, such as agro-processing, textiles, and solid minerals. This result challenges the assumption that financing alone drives openness, suggesting institutional quality plays a stronger role, as highlighted in contemporary trade theories.